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May 19, 2002

"Enron gets paid for moving energy to relieve congestion without actually moving any energy or relieving any congestion." -- Memo written by Enron lawyers in December, 2000 The black mark of Enron doesn't seem to be affecting partners leaving Arthur Andersen for other big accounting firms. For the 75% of Andersen partners with new job offers--some 1,300 people, according to those working to broker their deals--there doesn't seem to be any sort of taint discount whatsoever.

Offers include pay on par with their new colleagues--an estimated $500,000 a year--plus the ability to bring along eight to 13 staff. Some Andersen alumni are even getting bonuses of hundreds of thousands of dollars to make up for part or all of the partnership equity they leave behind. Andersen did not return calls seeking comment.

Key to the soft landing is Andersen's willingness to let partners out of noncompete agreements, in which partners promise not to solicit Andersen clients for 18 months after leaving. Hiring firms are paying Andersen compensation of up to $100,000 per partner, leaving them free to bring along old clients. Often, hiring firms are paying off leases, and buying office furniture, for about $200,000 a partner. That's cheap compared with the usual practice, where the hiring firm pays one to two times the partner's annual revenue. With Andersen's average large-client partner billing up to $2.5 million a year, that's quite a win for the new team. For 15 years, Nike's (NKE) Air Jordans have been tops in basketball shoes. Kids even killed over them.

But the latest version, released in February, seems to be an air ball. Managers at Foot Locker stores around the U.S. say inventories remain high, and a ranking of all Nike shoes sold puts new Air Jordans in 18th place, below even Nike baseball cleats. "The Jordan XVII did worse than any other recent Jordan release," says Florida dealer Steve Mullholand, owner of InStyleShoes.com, which usually sells hot shoes at a premium but is marking down Air Jordans 40%. Adds the owner of Sneaker World near Philadelphia, which is discounting them 25%: "The shoe was a bomb."

The reason? Partly, the $200 price tag, up at least 25% from last year. Young men who usually buy Air Jordans are instead spending $125 on Allen Iverson's shoe, the Reebok Answer 5, or other non-endorsed Nikes for $75 to $90. Even with a padded metal briefcase and CD-ROM explaining the design, $200 is too steep for an aging superstar's name. "Kids are smart," says shoe-industry analyst John Shanley of Wells Fargo Bank. "They know when they're being taken advantage of."

Nike, however, claims to be pleased with sales and says the Air Jordan brand (at 4% of 2001 revenues) doesn't have a big impact on the bottom line. Still, mediocre sales may be fitting. Michael Jordan's second return to the NBA, after all, was less than triumphant. Broadway theater looked like one of the big successes of New York's post-September 11 comeback. Thanks to aggressive marketing and help from the city, ticket sales that fell immediately after the attack rebounded over the winter.

But this spring is another story. Sales dropped 4.2% for the week of May 5, to $13.6 million, over the year-earlier period. In April's final three weeks, sales were down 12.5% over 2001. Advance sales--crucial to profitability because they're often full-price--are off, too. "It's been a bloodbath on Broadway," says a spokesman for Cameron Mackintosh International, producers of such shows as Les Mis?rables and Oklahoma!

Chalk it up to a lack of tourists and few must-see shows. One big draw, The Producers, saw its big-name stars, Nathan Lane and Matthew Broderick, depart in March. "Although New Yorkers have done a great job filling in, that's not going to go on forever," says League of American Theaters & Producers President Jed Bernstein. One bright spot: Recent Tony nominations could help put Broadway back in lights. Corporate lawyers say class actions proceed more smoothly in Delaware than in any other state. Texas--where suits against Enron are being filed--is rated a lowly 46th.

BEST STATES

DELAWARE

Ranked first in every area, from tort litigation to class action

VIRGINIA

Rated highly for handling of scientific evidence, discovery process

WASHINGTON

Scored well in treatment of class actions and judges' competence

WORST STATES

ALABAMA

Scored poorly on jury predictability

WEST VIRGINIA

Deemed a slow issuer of summary judgments and dismissals

MISSISSIPPI

Ranked last on 8 out of 10 measures, including judge and jury competence

Data: U.S. Chamber of Commerce, Harris Interactive Inc. What's hotter than a hedge fund? A hedge fund that invests in other hedge funds. So-called funds of funds are in huge demand. The $500 billion hedge-fund industry got $86 billion in fresh cash last year, twice as much as in 2000, and fund of fund managers got the lion's share of the new money.

But here's the rub: These funds were among the worst-performing hedge-fund groups last year, up an average of just 2.8%, according to Hedge Fund Research Inc. (HFRI). By comparison, the average hedge fund, as measured by the HFRI Composite Weighted Index, gained 4.6%. Flat first-quarter returns, on par with the Standard & Poor's 500-stock index, hardly seem worth the hullabaloo.

Worse, investors are paying a pretty penny for the bum steer. Hedge funds typically charge 1% of assets, plus 20% of profits. However, funds of funds charge their investors an additional 1% to 2% fee. A recent survey conducted by TMP Worldwide Executive Search found that their managers get fat paychecks, too: an average of $1.3 million last year. Nice work if you can get it. While Hershey Foods's CEO Richard Lenny is in the midst of a public brawl with the company's unions, he has also been ruffling feathers in the industry. The result: the start of what could be a price war in candyland.

Since taking the helm at Hershey in March, 2001, Lenny has worked to expand in convenience stores such as 7-Eleven and Circle K. There, candy bars reap higher margins than those sold in bags at the supermarket. Lenny hired more sales reps and is hoping new Hershey products, like the Reese's FastBreak bar launched late last year, will help it grab even more shelf space than it has already.

That isn't sitting well with rivals Nestl? and Mars. The price per pound for Nestl? candy bars fell nearly 8% in the first three months of 2002 over the same period a year earlier, according to Information Resources Inc. Mars and Hershey prices went down 1.9% and 1.4%, respectively. A Mars spokeswoman says the company hasn't cut prices and says the drop is due to other factors, possibly discounts or promotions by retailers. Nestl? declined to comment. And a Hershey spokesman says the company has offered extra promotions on some individual candy bars--a response to "heightened competitive activity"--but offset that with increases on products such as bags of Kisses.

If price cuts continue, it could hurt overall growth. Bad news for investors--good news for consumers looking for sweet deals. Many companies require their CEOs to own a certain number of shares, figuring that having a big stake keeps execs acting in shareholders' interests. But in scrutinizing more than 70 companies, we found three CEOs who appear to be breaking the rules:

-- George Harad at Boise Cascade (BCC), the paper-products maker. Rules require him to own nearly 86,000 shares, but after eight years as CEO, he has accumulated only 3,511. In that time, he has exercised 300,000 options for $3.4 million. A Boise spokesman says that when Harad's remaining options are counted, he exceeds the requirement.

-- Leo Mullin at Delta Air Lines (DAL). With fewer than 39,000 shares to his name, he is far short of the required 111,000. Until Delta's plunging stock price drove his options underwater, he had plenty of chances to up his stake, but passed. A Delta spokesman says Mullin has until September, 2003, to come into compliance. Unlike Boise, Delta doesn't count options toward the requirement.

-- James Farrell at Illinois Tool Works. He owns fewer than 23,000 shares, but 66,000 are required. He has $25 million in unexercised options. A spokesman says those options would put him in compliance.

Governance experts say that for stock ownership to link CEOs' interests with shareholders', options should not be counted.